Fidelity Unveils Lifestyle Fund Offerings
Co-managed by Ren Cheng and Jonathan Shelon, the Fidelity Advisor Freedom Funds are funds of funds that invest in 13 different Fidelity Advisor Funds and Fidelity Cash Reserves, t he Boston, Massachusetts-company announced in a news release . Four of the Fidelity Advisor Freedom Funds are tied to specific target dates when investors will need the money: 2010, 2020, 2030, and 2040, while the fifth fund, Fidelity Advisor Freedom Income Fund, is intended for those investors who are already at their target date and are seeking low risk with some growth.
The funds are automatically rebalanced and are gradually adjusted through an active roll-down allocation process to become more conservative as the investor’s target date approaches. The new funds are available to investors through investment professionals at banks, brokerage firms and insurance companies, and are also offered to plan sponsors through Fidelity’s advisor-sold retirement plans, including 401(k)s and 403(b)s.
According to Fidelity, the four Fidelity Advisor Freedom Funds seek high total return with a secondary objective of principal preservation as each fund approaches its target date and beyond. Fidelity Advisor Freedom Income Fund seeks high current income with preservation of principal. The longer-term funds commenced with higher percentges of their portfolios invested in equity funds, the investment company said.
Asset Allocations
For example, Fidelity Advisor Freedom 2040 Fund kicked-off with about 75% of its portfolio invested in domestic equity funds, 15% in international equity funds, and 10% in high yield funds. Fidelity Advisor Freedom 2030 Fund started with about 70% of its portfolio invested in domestic equity funds, 13% in international equity funds, 10% in investment grade bond funds, and about 7% in high yield funds. Fidelity Advisor Freedom 2020 Fund started with about 60% of its portfolio invested in domestic equity funds, 22% in investment grade bond funds, 10% in international equity funds, and about 8% in high yield funds.
The shorter term fund – Fidelity Advisor Freedom 2010 Fund – started with about 40% of its portfolio invested in domestic equity funds, 40% in investment grade bond funds, 10% in money market funds, 5% in international equity funds, and about 5% in high yield funds. Fidelity Advisor Freedom Income Fund invests about 40% of its portfolio in money market funds, 40% in investment grade bond funds, and 20% in domestic equity funds.
One of the managers, a nine-year Fidelity veteran, Cheng is currenlty portfolio manager of structured investments for the Structured Investment Group within Strategic Advisers, a subsidiary of Fidelity Investments. In his role, Cheng is responsible for managing over $17 billion in asset allocation portfolios as well as new product development for defined benefit and defined contribution clients. Shelon is a portfolio assistant for the Structured Investment Group within Strategic Advisers. His responsibilities include constructing and managing risk-controlled portfolios for Fidelity’s institutional clients
Spartan Fund
In a related announcement, Fidelity also introduced Advisor share classes of Spartan Short-Intermediate Municipal Income Fund. Fidelity Advisor Short-Intermediate Municipal Income Fund (Classes A, T, B, C, and Institutional) seeks as high a level of current income, exempt from federal income tax, as is consistent with preservation of capital. The fund normally invests at least 80% of its assets in municipal securities whose interest is exempt from federal income tax.